Lambo ready to fire Russian partner over poor sales

Country's biggest luxury group blames low volume on crisis

PARIS (Reuters) -- Lamborghini has given notice to Mercury, Russia's biggest luxury group, that it will end their partnership because it is not satisfied with its services and sales performance, the Italian sports car maker said.

Mercury, which has been working with Lamborghini for more than four years, said it is trying to find solutions with the Italian company, and stressed that the financial crisis was more to blame for low sales than its strategy as a car dealer.

The troubles between the two companies, while part of everyday business, highlights the difficulty foreign luxury car makers have doing business in Russia, which is known for its complicated legal system.

Lamborghini said it was about to sign with another dealer to start selling cars in St. Petersburg. Mercury has exclusive rights to Moscow until 2011.

The Italian automaker said it was not happy with the way the Russian company had developed customer relations.

"Lamborghini gave notice to the Mercury group," a spokesman for Lamborghini said, adding that Mercury still had a chance to "show us that a better performance is possible and to show us a clear commitment to our brand."

Mercury is a market leader

Mercury, which started as a jewelry shop 15 years ago, sells Maserati, Ferrari and Bentley cars and Chopard jewelry.

It owns the prestigious Tsum department store and the Barvikha luxury village, just outside Moscow.

Mercury generated more than 1 billion euros ($1.40 billion) in annual sales in 2008 and is widely regarded as a gatekeeper for the entry of foreign luxury goods into Russia.

"We do all the necessary things that dealers need to do," Alexander Reebok, general manager of Mercury, told Reuters on Wednesday. "We are surprised by their decision."

"We are trying to resolve the problems ... Now with the crisis, they (Lamborghini) think it is a dealer's problem, but it is not, it is a world problem ... People are not in the mood to buy cars right now."

Lamborghini, whose logo is a charging bull, says only men buy its cars, which start at 170,000 euros and can cost up to 360,000 euros.

Soft sales

Lamborghini, is a unit of the Audi AG, which is owned by Europe's biggest carmaker, Germany's Volkswagen AG. The Italian company made 2,430 cars in 2008, of which 13 were purchased by customers in Russia. It sold 16 cars in Russia in 2007, 14 in 2006, and 2 in 2005.

"The market potential is not covered," Lamborghini said in an e-mailed statement. "For sure, we take into consideration that Russia suffers from long, strong winter and infrastructural challenges."

Mercury said the crisis had hit luxury cars more than other luxury products. "But we fulfilled the plan in 2008," Reebok said about Lamborghini car sales planned for last year.

Mercury said it expected group sales to drop by up to 25 percent this year, or back to 2006-2007 levels. Reebok said the group was fully self-financed and did not have any debt.